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CORPORATE FORMATION CORPORATION

“An artificial being created by operation of law, having the right of succession and powers, attributes and properties expressly authorized by law or incident to its existence” (New Corporation Code) CHARACTERISTICS: 1. Separate legal entity – artificial being 2. Created by operation of law 3. Right of succession 4. Powers, attributes, properties authorized by law 5. Ownership divided into shares 6. Management is vested in a Board of Directors

ADVANTAGES: 1. capacity to act as a legal entity 2. large scale of business undertaking 3. unlimited life 4. limited liability of stockholders for corporate debts 5. shares can be transferred without the prior consent of other stockholders 6. centralized management under Board of Directors DISADVANTAGES 1. not easy to form because of complicated legal requirements 2. activities limited by the articles of incorporation 3. subject to rigid government control 4. possibility of abuse of powers. 5. restricts active participation by stockholders CLASSES OF CORPORATION

Private Corporation-organized for private benefit. 4. 8.capital comes from fees paid by individuals composing it.private corporation performing public functions. Incorporators – persons who originally formed the corporation. Corporators – persons who compose the corporation. 4. 3. Closely-held Corporation -50% or more of its stock is owned by 5 or less. Promoters – persons who undertake the formation of a company. Quasi-public Corporation. PROCESS OF ORGANIZING A CORPORATION:
. 9. Stockholders – corporators of stock corporation. 2.ownership is widely held by many investors. 5. set it going and take necessary steps to accomplish its purpose. (stockholders or members) 3. 6. unissued shares but will pay at later date. 2. Members– corporators of non-stock corporation. COMPONENTS 1.
Stock Corporation -capital is divided into shares of stock. 7. Open Corporation. public. aim or end 5. Non-stock Corporation. Public Corporation-organized to govern a portion of the state. Foreign Corporation-organized under the laws of other countries.1. Subscribers – persons who agreed to take original. Underwriters – in charge of disposing the shares of stock to the gen. 6. Domestic Corporation -organized under Philippine laws 7.

BASIC RIGHTS OF SHAREHOLDERS 1. vouchers and other supporting documents. Stock and transfer book – stockholders’ journal. ledger and subscribers’ ledger. CORPORATE RECORDS: 1.
. to share in the distribution of assets upon corporate liquidation. to vote in stockholders’ meeting. to share in the distribution of corporate profit. 3. PRE-INCORPORATION REQUIREMENTS 1. pre-emptive right. 3.1.to maintain one’s ownership in the corporation by buying additional shares. Commencement of the business – should start within 2 years from date of incorporation. Record of all business transactions – journals. Articles of Incorporation – enumerates the powers and restrictions conferred upon the corporation by the government. ledgers. By-Laws – contains provisions for internal administration of the corporation. Incorporation – the process of formalizing the organization of the corporation.
DOCUMENTS FILED WITH SEC: 1. 2.
Promotion – set up tentative working organization to solicit subscriptions to raise sufficient capital. 2. Minutes of all meeting of directors and stockholders. 2. 25% OF THE AUTHORIZED CAPITAL STOCK MUST BE SUBSCRIBED. 2. 3. 4.